PARIS (MNI) – The downward trend in interest rates and intensive
contact with potential investors have limited the impact of the
sovereign debt crisis on Spain’s borrowing costs, the head of the
country’s debt agency said in an interview published Friday.

“I am now meeting with investors — at their request — practically
every week,” Soledad Nunez, central director of the Spanish Treasury,
told the business daily Les Echos.

“Our work consists of explaining to investors our strategy but also
the economic reforms” the government is implementing, Nunez said, noting
the greater emphasis this year on road shows in London, Paris, Asia and
the US.

So far, there has been little decline in foreign investment in
Spanish debt, Nunez said, dismissing rumors to the contrary. In last
week’s syndicated launch of E6 billion worth of new 10-year paper, two
thirds of investors were non-residents, she said. She noted that the
share of domestic investors for both short and long paper has risen only
slightly since the end of last year from 47% to 50%.

Nunez declined comment on the impact of the ECB’s sovereign
bond-buying program, but noted that the spread of Spanish 10-year bonds
over the German the Bund had climbed from 70 bps in December to over 200
bps today. (The 10-year has narrowed in recent days and now stands
around 182 bps).

“But in terms of absolute rates, the rise is much less
significant,” she said. “We’ve gone from 4% to 4.7%, which means that
our financing costs have not exploded at all.”

The spread over the Bund has narrowed in the secondary market from
the three-year to the 15-year segments, she said. Just after Thursday’s
well-bid 15-year auction, at which the Treasury had no problem raising
its targeted amount, the rate was slightly below that of the market.

Including Thursday’s auction, the Treasury has now completed 63-64%
of its full-year financing program, which amounts to nearly E97 billion
at the long-end, she said.

–Paris newsroom, +331 4271 5540; stephen@marketnews.com

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